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Recent Policy Studies
Economic GrowthBy Matthew Mitchell, Mercatus CenterResearch Papers, 07/09/2012
In this paper, Matthew Mitchell shows that the financial bailouts of 2008 were but one example in a long list of privileges that governments occasionally bestow upon particular firms or particular industries. At various times and places, these privileges have included (among other things) monopoly status, favorable regulations, subsidies, bailouts, loan guarantees, targeted tax breaks, protection from foreign competition, and noncompetitive contracts. Whatever its guise, government granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.
Economic GrowthBy Economics 21, e21: Economic Policies for the 21st CenturyEditorial, 07/09/2012
The plight of the United Kingdom’s economy is a useful rejoinder to those who believe the fixed exchange rate is the main driver of the economic problems in the euro zone. The U.K. responded to the financial crisis by running large fiscal deficits, cutting interest rates to zero, and “printing money” through several rounds of quantitative easing. The result has been worse macroeconomic performance in the U.K. than in Spain, a country “trapped” in the euro straightjacket. This outcome is fundamentally inconsistent with the Keynesian view that the key to recovery in peripheral Europe is devaluation and monetary-financed deficit spending. The euro is quite obviously a deeply flawed regime that will need to evolve to survive. Yet, the fixed rate regime often receives blame that it does not deserve, as evidenced by the economic turnaround of Latvia and Estonia, which are growing rapidly in the absence of devaluation.
Foreign Policy/International AffairsBy Condoleezza Rice, The Heritage FoundationLecture, 07/09/2012
American economic policy has dominated most of the current national political campaign. As important as our nation’s economic strength and vitality clearly must be, however, it cannot overshadow the role international affairs continues to play, and most definitely will play, in assuring our overall national well-being. Former Secretary of State Condoleezza Rice reflects on the world situation today, the unprecedented challenges before us, and why America must not forsake a strong leadership role in the international arena.
The Constitution/Civil LibertiesBy Kevin J. Hasson, The Heritage FoundationLecture, 07/09/2012
The recipient of this year’s Salvatori Prize for American Citizenship is the founder of the Becket Fund for Religious Liberty, a nonprofit public interest law firm that is dedicated to protecting the free expression of all faiths, motivated by the idea that because the religious impulse is natural to human beings, religious expression is natural to human life and convinced that if everybody in America does not have religious liberty, then nobody in America has religious liberty. Today, believers are opposed by the forces who believe in nothing. Therefore, they need to defend the forces who believe in truth against the forces who believe in nothing and who are opposed to the very idea of anybody making truth claims in public.
Foreign Policy/International AffairsBy James Phillips, Luke Coffey, The Heritage FoundationIssue Brief, 07/09/2012
The Obama Administration has failed to provide clear leadership regarding the deteriorating situation in Syria. It naively sought to engage with Bashar Assad’s dictatorship before protests erupted last spring. But this myopic engagement policy failed to yield positive results, just as it failed with Iran, Assad’s chief ally. Now the Administration is reduced to pleading for Russian cooperation at the United Nations despite Vladimir Putin’s cynical efforts to prop up his Syrian ally with arms while denouncing foreign intervention. Instead of vainly seeking agreement with adversaries with incompatible interests (as with Russia in the recent talks of the “action group” conference in Geneva), Washington should seek to resolve the Syrian crisis by cultivating friendships in the Syrian opposition and empowering them to win their struggle for freedom. To do this, the United States should lead a group of like-minded allies who are willing to support such a successor government in post-Assad Syria.
International Trade/FinanceBy Derek Scissors, The Heritage FoundationIssue Brief, 07/09/2012
Chinese investment could be a global economic force for decades to come. The potential was underlined in the first half of 2012, when investment climbed more strongly than in 2011. The U.S. in particular saw a rebound. Policymakers should welcome this development by making the American review process quicker and more transparent. Washington should also seek better American investment access on a bilateral and multilateral basis, including in China.
Economic GrowthBy Rea Hederman Jr., James Sherk, The Heritage FoundationIssue Brief, 07/09/2012
The June employment report released this morning by the Bureau of Labor Statistics (BLS) shows a labor market treading water. Employment and the labor force grew only in line with population growth at 80,000, and unemployment remained at 8.2 percent. In short, another month passed without a significant reduction in the number of unemployed Americans. Job growth and losses were modest across sectors. The duration of unemployment also remained essentially unchanged. The labor market shows no signs of improving—a marked slowdown from the steady growth in the first quarter. Labor market improvement will be made more difficult by the onslaught of higher taxes on investment and work due to hit on January 1, 2013—the so-called Taxmageddon.
Monetary Policy/Financial RegulationBy Sascha Tamm, Competitive Enterprise InstituteWebMemo, 07/06/2012
German Chancellor Angela Merkel has stated repeatedly that there is no alternative to the euro. People inside the euro zone do not have any alternative to the euro for an all-purpose currency, but that is because governments have barred alternatives. The euro is one of the major causes of the problems besetting Europe today. Maintaining the currency union in its present form may cause the breakdown of Europe’s single market over the long run. The basic principles of the common market could save the European Union, if they were applied to monetary policy. Europe’s currency future lies in competition. Eventually, different global, and even local, currencies could emerge. A free market in currency would contain, if not eliminate, the two main sources of financial crises: unlimited expansion of the money supply and unlimited growth of government debt.
Foreign Policy/International AffairsBy Abraham D. Sofaer, Hoover InstitutionBook, 07/06/2012
Attacking Iran's nuclear program with preventive strikes may fail. Allowing Iran to acquire nuclear weapons would also be dangerous, given Iran's support for terrorism, its threats against Israel and other states, and the possibility that it might act irrationally. Taking on Iran proposes an option to these alternatives: that the US increase the pressure on Iran beyond economic sanctions by ending its over 30 years of tolerating aggression by Iran's Revolutionary Guard Corp (IRGC) by holding Iran accountable for IRGC attacks. Once Iran signals its willingness to negotiate in earnest, this book advocates that the US adopt the negotiating practices that the Reagan Administration found necessary to negotiate effectively with the Soviet Union. Those practices enabled the US to engage the Soviets despite their ongoing misconduct, for example, and differed in other respects from the negotiating practices used by the US in dealing with Iran.
The Constitution/Civil LibertiesBy Richard A. Epstein, Hoover InstitutionDefining Ideas, 07/06/2012
Chief Justice Roberts’ case is weak. The original intuition was that general welfare of the United States only covered standard public goods, leaving all welfare functions to the state. That position was obviously abandoned. But in its place, the rule was that the taxation power could never be used as an indirect form of regulation that Congress could not impose directly. That is exactly the argument that Chief Justice Roberts holds for the Commerce Clause, but at no point does he address the connection between the two clauses. The entire edifice that underlies the Affordable Care Act on this critical mandate thus rests on a constitutional house of cards. If the legislation fails under the Commerce Clause, there is no reason to resurrect it by engaging in extravagant machinations with the words “tax” and “penalty.”
Economic GrowthBy Tim Kane, Hudson InstituteBriefing Paper, 07/06/2012
The historical record shows that recessions are often inherited. The severity of the 2007-2009 recession was uniquely large. On the other hand, no president enjoyed the tailwind of loose monetary policy on the scale provided by Bernanke’s Federal Reserve, nor the massive debt-financed government stimulus that continues to this day. As for unique challenges, no presidents aside from Franklin Roosevelt and George Bush suffered attacks on American soil like Pearl Harbor and 9/11. Certainly the current Federal Reserve supportive policies are a sharp contrast with what Reagan faced. As for policy actions, no other president since Herbert Hoover in 1932 responded to a recession by raising taxes as aggressively as Obama. The results to date confirm that the high-tax, high-spend policy approach is failing to generate a real recovery, and worse, has created a new normal that is 12 million jobs below the old normal.
Economic and Political ThoughtBy Robert Higgs, Independent InstituteBook, 07/06/2012
In Delusions of Power, renowned economist and historian Robert Higgs calls into question our ingrained notions concerning the nature of government and political power. Higgs uproots the foundation stone upon which the state’s powers have rested and grown unchecked by the public. Beginning with the Founding Fathers and moving forward, Higgs reassesses the world wars, the Great Depression and the New Deal, and the financial debacle that began in 2008, demonstrating Americans’ loss of economic and civil liberties. He brings together the crisis in policymaking; key political actors and events; and the impact of war on the economy and liberties. For Higgs, war and its costs have had a major impact on American life, law, and freedom.
Health CareBy Enrico Colombatto, Independent InstituteThe Independent Review, 07/05/2012
Despite the health-care industry’s weight, the cost of government intervention is not the main source of problems for our welfare systems. Politically powerful groups ensure that privatization remains politically difficult to obtain. The rent-seeking game has succeeded in producing large coalitions of winners and very large groups of people who did not know whether reform would put them on the winning or the losing side. These large groups have now come to realize that transition would make society better off. Yet, the temptation to free-ride on the next generation has proved all but irresistible. That very rent-seeking game has seriously hampered our prospects for growth. The current connotation of social justice may crumble. In that event, large chunks of the welfare state, including government production of healthcare services, may collapse, and the notion of individual responsibility may regain center stage.
EducationBy Sarah Archibald, Mike Ford, Wisconsin Policy Research InstitutePolicy Report, 07/05/2012
A thorough review was conducted of the current and historical context of Wisconsin testing policies and the potential and logistical introduction of a statewide value-added assessment system. Several specific proposals are recommended, including adding value-added data to statutorily required school and district performance reports, as well as requiring all teachers and principals receive a value-added analysis of their students’ state standardized test scores. The review also calls for ensuring that teachers and principals are provided with training encouragement of incorporating value-added methodology at Wisconsin schools of education. While there are moderate costs to getting the most out of value-added analysis, there is vast potential to use existing federal and state funding as well as private philanthropy to offset these costs. It is time to ensure that useful data reach those most important in determining student success. The current value-added analyses already being done in Wisconsin is a step toward giving teachers and principals additional tools to meet the needs of Wisconsin pupils.
Budget & TaxationBy Nate Neligh, Independence InstituteIssue Paper, 07/05/2012
Policy debates frequently turn on whether the government is spending at a reasonable level, and that is defined by the relative spending in other states. Relatively low rankings are presumed to indicate of under-spending by Colorado governments. The low rankings, however, are inconsistent with Colorado’s overall ranking for tax burden, which is close to the national median. The proper rankings should approximate the demand for the public service. Personal income fails this test; higher income can actually lead to lower demand for many government programs. Without market forces, the government can never truly know if it is providing the right amount of services. Also, many of these rankings do not include local spending, which can unfairly bias results, because in Colorado a disproportionate amount of government spending is done at the local level. The low rankings are deceptive and inappropriate, and do not support drastically increased spending.
Health CareBy Cliff Asness, American Enterprise InstituteThe American, 07/05/2012
With the Supreme Court ruling that ObamaCare is constitutional, we’re all going to be working on fixing, repealing, or replacing ObamaCare. Fixing our system is not as complicated as many make it out to be. Outside of interstate competition and health savings accounts, the large focus of reform should be removing employer deductibility and getting back to a system of individuals buying catastrophic insurance, and deciding how much we want to subsidize those who can’t afford adequate healthcare or insurance. The most important myths we must confront include the rising amount we spend on healthcare is not the same thing as rising prices, the costs of our system versus others are often exaggerated, and the benefits of our system often minimized, for political purposes.
ImmigrationBy Lee Harris, American Enterprise InstituteThe American, 07/05/2012
Critics of Justice Scalia’s dissent have lambasted him for his argument in the Supreme Court’s ruling on the Arizona immigration law, but none have looked into the heart of his argument. Justice Scalia wants to make it clear that his argument is not his own quirky idea of sovereignty. By citing Vattel and Pufendorf, Scalia demonstrates that the power to exclude has long been recognized as an essential attribute of sovereignty. As Vattel put it, “The sovereign may forbid the entrance of his territory either to foreigners in general, or in particular cases, or to certain persons, or for certain particular purposes, according as he may think it advantageous to the state.” This principle is still recognized in international law, which is why the most wretched and pitiful nations in the world still retain the right to forbid unwanted immigrants—a right that has for all practical purposes been denied to the “sovereign” state of Arizona by a Supreme Court supposedly dedicated to preserving “the constitutional design” of federalism.
Foreign Policy/International AffairsBy Camille Pecastaing, Hoover InstitutionPolicy Review, 07/05/2012
Much has been made of the recent success of Islamist parties in national elections that followed the Arab Spring. While some praise Islamism as the first genuine expression of popular sovereignty in a long time, others warn of an Islamic winter. The Islamists know no better than anyone where their recent success might take them. Starting from common origins, they followed different routes to get there. More than anything, what they showed over the decades in the wilderness was pragmatism and adaptability to challenging environments, characteristics that they will have to draw upon to move from the conquest to the exercise of power in the post–Arab Spring era. The actual impact Islamists will have will be limited by the kind of society they inhabit, the resources they have to work from, and the choices forced upon them. The challenges are numerous.
The Constitution/Civil LibertiesBy Joel Alicea, Hoover InstitutionPolicy Review, 07/05/2012
The primary drivers of the effort to consider how originalism applies outside of the judiciary have been public officials, a rarity in the development of constitutional theory. The reemergence of a vigorous brand of constitutional conservatism has been widely commented on, from National Review to the New York Times. The Tea Party movement no doubt has had much to do with this, and the unprecedented assertions of federal power during the Obama administration have likewise contributed to a constitutional backlash. Senator Lee’s speech to the Federalist Society is by far the most articulate version of legislative originalism provided by a public official, but the principles he espoused are shared by a growing faction within the conservative movement. There is reason to think that the rise of lawmakers who take constitutional interpretation seriously will continue, and originalism will have to confront the theoretical implications of this development in American constitutionalism.
Economic GrowthBy Ludger Kühnhardt, Hoover InstitutionPolicy Review, 07/05/2012
The next steps in the ongoing Arab revolution cannot be predicted. It would be premature to downplay the potential of hereditary Arab monarchies to transform themselves into parliamentary monarchies. The advantage of the Gulf monarchies is their strong economic basis. Arab oil and gas resources are not unlimited, however. Moreover, the social structure of the Gulf monarchies (with large, poorly treated migrant labor populations) is not without implications for the future of Arab societies. Moving from rent-seeking structures to complex functional economies in which Arab youth will find its legitimate and happy place in life will not be easier in Arab monarchies than in Arab republics. Political surprises cannot be ruled out. But the Arab Spring has opened the windows of change in the Arab world. This is a promising new beginning that allows the West a new look at Arab societies and the implications of their development.
Family, Culture & CommunityBy Nicholas Eberstadt, Apoorva Shah, Hoover InstitutionPolicy Review, 07/05/2012
There remains a widely perceived notion that “Muslim” societies are especially resistant to embarking upon the path of demographic and familial change that has transformed population profiles in Europe, North America, and other “more developed” areas. But such notions speak to a bygone era; they are utterly uninformed by the important new demographic realities that reflect today’s life patterns within the Arab world, and the greater Islamic world as well. Throughout worldwide Muslim community fertility levels are falling dramatically and traditional marriage patterns and living arrangements are undergoing tremendous change.
Health CareBy Mark Dybul, Peter Piot, Julio Frenk, Hoover InstitutionPolicy Review, 07/05/2012
As we emerge from a decade of rapid expansion in global health that began with the conceptual foundations for a new era in development, now is the time for to create a new architecture for the governance of global health. Bringing coherence and direction to the institutional structure of global health could radically improve investment outcomes and propel global heath from a 20th- to a 21st-century approach. Governments, civil society organizations, and the private sector all have a key role to play in designing a new global health architecture and sustainable financing. A bold restructuring of global health architecture could establish models and lessons learned for other areas of development. A focus on the health of a person could provide insights that focus on creating the opportunities needed for every human being to realize his or her full potential.
Foreign Policy/International AffairsBy Kori Schake, Hoover InstitutionDefining Ideas, 07/05/2012
Elections in Egypt, Tunisia, and Libya—even the glacially slow political change that the Gulf’s authoritarian governments are quietly experimenting with—demonstrate the people of the Arab world want accountable and transparent governments. They want institutions to constrain the power of rulers; they want grievances addressed; and they want the means by which to change their leaders if those leaders aren’t responsive to their concerns. The revolutions of the Arab spring have given citizens of those countries hope that political change can achieve those ends. If governments fail to produce that change, the al Qaeda narrative could again get traction in the disillusionment and despair that follows.
Transportation/InfrastructureBy Josh Barro, Manhattan InstituteCity Journal, 07/05/2012
Don’t blame cars for the shortcomings of mass transit. A fair look at the whole picture shows that government subsidizes mass transit much more heavily than it subsidizes driving and that transit’s problems go far beyond subsidies for cars. One way to support mass transit is to make it more cost-effective. Many American transit agencies, especially in the Northeast and California, are saddled with uncompetitive compensation structures and work rules that drive up operating costs. And some jurisdictions should consider higher fares to increase revenues. Transit advocates aren’t incorrect when they grumble about road subsidies. But if they really want American mass transit to work better, they’re missing the key target. A much smarter approach must include a reduction in subsidies, looser urban zoning, and reducing transit costs.
EducationBy June Kronholz, Education NextEducation Next, 07/05/2012
During their second year in Relay Graduate School of Education’s two-year masters-degree program, elementary-school teachers are asked to show that their own students averaged a full year’s reading growth during the school year. They must also set a reading goal for each child, perhaps two years’ growth for a child who is three years behind, for example. Students can earn credit toward an honors degree if 80 percent of the children they teach meet their individual reading goals. Even Relay’s admirers concede that it’s too soon to tell whether the model works. It’s operating in just two cities: New York, where it’s offering a master’s degree to 206 students this year, and Newark, New Jersey, where so far it has state approval only to offer a one-year teaching certificate and has enrolled 64. Relay’s first class won’t graduate until 2013. Philanthropies are still footing much of the bill.
Economic GrowthBy Economics 21, e21: Economic Policies for the 21st CenturyEditorial, 07/05/2012
The Federal Reserve released its triennial Survey of Consumer Finances (SCF). The SCF provides the best available data on the financial conditions of U.S. households and cross-sectional differences in income, asset holdings, and liabilities. According to this year’s SCF, median household net worth plummeted by 38.8% between 2007 and 2010 and is now down to levels not seen since 1992. The White House quickly responded to the news, claiming that “the entire drop in household wealth… occurred in 2008 – before the President took office.” The White House went on to claim that “household wealth has risen every year President Obama has been in office” and then cited increases in stock aggregates as evidence. The claims made by the White House are disingenuous because they ignore the median U.S. household and focus instead on the increase in overall wealth, which has largely come from gains in the stock market.
Health CareBy Mario Loyola, Texas Public Policy FoundationReport, 07/03/2012
The Supreme Court’s decision in ObamaCare was historic on many levels. The main provisions of ObamaCare were upheld, on the basis of a questionable distinction between a “tax” and a “tax penalty.” But a majority of the Justices agreed on a remarkable number of quintessentially Tenth Amendment propositions, sometimes in dramatic departures from longstanding precedent. The Court struck down the Medicaid expansion provisions of ObamaCare. In doing so, a majority of the Justices embraced important federalist principles, sometimes departing from longstanding precedent. In its ruling on Medicaid, the Court agreed with the Texas Public Policy Foundation’s view that conditions attached to a federal program must not go beyond the manner in which federal funds are spent. States will now be shielded from some of the worst excesses of federal overreach.
Economic GrowthBy William McBride , Tax FoundationFiscal Facts, 07/03/2012
Who are the rich? It depends who you ask and when. Numerous reports have pointed to the growth in high incomes over the last few decades. However, at least among the highest income earners, the fortunate 400, there has been no growth in wages since 1992. Rather, virtually all of the growth is from pass-through business income and capital gains. The volatile nature of this income, particularly capital gains, means that high-flier status is fleeting. Most members of the fortunate 400 remain so for just one year, likely because of the sale of one big asset, such as a family farm, business, or stock. The fortunate 400 pay a lot of income tax—about enough to fund the National Science Foundation and the Department of Interior, which includes the National Park Service. At the peak in 2007, they funded the State Department. Taxes have doubled, in real terms, since 1992. Likewise, the fortunate 400’s share of income taxes paid has doubled to 2 percent—almost the share paid by the bottom 69 million filers.
Health CareBy John R. Graham, Pacific Research InstituteHealth Policy Prescriptions, 07/03/2012
Congress has just re-authorized the Medical Device User Fee Act for five years. This continues a decade-long program whereby the medical-device industry supplements the Food and Drug Administration’s appropriated budget with user fees. Even though the FDA’s budget for licensing new medical devices has grown by almost half, in real terms, from 2003 through 2011, it has not increased its approvals of new medical devices. One simple estimate of productivity shows a 29 percent drop. This failure to make productive use of its increased financial resources threatens the future of research and development in medical innovation in the United States. Americans should use the reauthorization of the Medical Device User Fee Act to demand that the FDA finally make good on its promises of improved regulatory effectiveness.
The Constitution/Civil LibertiesBy Matt A. Mayer, Oklahoma Council of Public AffairsAnalysis, 07/03/2012
The federal government is financially broke. Because it is not restricted by a balanced budget requirement, it constantly spends money it doesn’t have. With the upcoming presidential election, there is no better time than now to have a vigorous debate on how we can best pull our country back from the fiscal brink and reinvigorate American Exceptionalism. The discussion must be moved to the real issue—where do Oklahomans want the locus of government power over their lives to reside? The answer lies in the Constitution, which grants the use of competitive federalism to solve our nation’s problems.
Economic GrowthBy William B. Conerly, National Center for Policy AnalysisPolicy Report, 07/03/2012
More than 75 years since the system was created, unemployment insurance is still a contentious issue. Whether the problem is a lack of available work or the resistance of the unemployed to seek new work, the unemployment system itself seems to be failing to do its job. However, we could speed the re-employment of the unemployed by using staffing agencies to match people with available positions.